Because politicians couldn't agree on nearly $1 trillion in cuts to make to the nation's budget, the cutting goes on autopilot. During the fiscal year, $85.4 billion in cuts started to kick in as of March 1.

Talk to 50 different pundits about the sequestration, and investors will get 50 different opinions on what the cuts will mean for the economy. But for investors, the hit is pretty clear.

The number one target for the sequestration cuts is the defense budget, which is slated for a roughly 10% cut in 2013. And if there's an area of the economy to be hurt by the cuts, it's likely to be defense stocks.

Even so, investors seem to be largely ignoring the risks so far. The iShares Dow Jones Aerospace & Defense exchange traded fund, which owns all the major defense stocks, is up nearly 7% over the past 52 weeks.

One of the biggest defense companies, Lockheed Martin, has seen its stock hold steady over the past year. Investors are betting that lawmakers will adjust the cuts before they seriously dent the companies' futures.